Lax Renewal Processes Result in Billions in Lost Revenue

 
 
By Michael Vizard  |  Posted 2013-09-05 Email Print this article Print
 
 
 
 
 
 
 
 
 
  • Previous
    1-The Value of Renewals
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    The Value of Renewals

    It's easy for solution providers to take their eyes off the renewal ball. Recurring Revenue: Six to Seven Times More Profitable, Grows on Average 8% a Year, vs. 6% for New Revenue, Vendors Overestimate Renewal Rates by 10% to 20%, Best Practice Vendors Increase Renewal Rates on Average by 18%
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    2-Renewal Rates by Category
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    Renewal Rates by Category

    A proactive approach substantially increases revenue. Software Vendors: 26% growth in revenue from renewals, Hardware Vendors: 23% growth in revenue from renewals, SaaS Vendors: 7% growth in revenue from renewals
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    3-Bad Data at the Root of the Renewal Problem
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    Bad Data at the Root of the Renewal Problem

    The whole renewal process is a lot more labor-intensive than it should be. 40% of initiatives do not achieve objectives due to dirty data. Renewal salespeople spend less than 45% of their time selling.
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    4-Renewal Success Goes to the Early Bird
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    Renewal Success Goes to the Early Bird

    The later the process starts, the less likely the chance of success. Only 16% of companies track decision time, close and conversion rates—which are basic to understanding true renewal rates. Each week closer to renewal reduces the chances of renewal by 2.5%. Once a contract is 30 days expired, the chances of renewal are cut in half. 45% of customers do not renew because they believe they were never contacted.
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    5-Dependency on the Channel
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    Dependency on the Channel

    Most vendors depend heavily on the channel for renewals. JAPAC and EMEA regions rely on the channel for up to 80% to 90% of their renewals business. North America relies on the channel for up to 68% of renewals.
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    6-The Channel Challenge
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    The Channel Challenge

    Vendors tend to favor direct sales for renewals whenever they can. Channel sales teams, on average, are 12 percentage points less effective than direct teams. Most companies provide limited tools to the channel. 45% provide email opportunity lists, 21% provide price lists and quote templates, 20% provide a partner portal with expiration dates and tools
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    7-The Science of Renewals
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    The Science of Renewals

    Renewals needs to be a lot more about science than art. Only 21% of companies have a dedicated renewal sales team. Successful renewal sales requires a culture of science and discipline. Role specialization, 100% transparency about targets and performance, Structured territory reviews and stack ranking, Renewals-specific training curriculum—over 100 hours in Year One
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    8-The Real Renewal Opportunity
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    The Real Renewal Opportunity

    The potential revenue upside to vendors and partners is not insignificant. With proper insight into channel operations, companies in North America and JAPAC/EMEA increased their renewal rates by 20% and 40%, respectively, across all market segments.
 

Each year, solution providers leave millions of dollars in revenue on the table simply because they didn't follow up on a renewal opportunity. A new report from ServiceSource, a provider of application software that is designed to simplify managing the renewal process, makes that clearer than ever. The company's first annual Global Recurring Revenue Index, based on surveys of ServiceSource customers, finds that renewal rates through the channel are, on average, 12 percentage points lower than through direct sales, resulting in billions of dollars in lost revenue opportunities for vendors and their partners. Despite the issue with renewals through the channel, the report notes that the vast majority of companies depend on the channel to generate renewals. In fact, much of the blame for poor management of renewals can be ascribed to processes that depend on flawed data or simply lack of access to critical information and tools. Regardless of who is at fault, with a little more discipline, it's clear that there is a lot more money to be made by being more attentive to what's actually happening with existing customers, versus always trying to land the next big one.

 
 
 
 
 
 
Mike Vizard has been covering IT issues in the enterprise for 25 years as an editor and columnist for publications such as InfoWorld, eWeek, Baseline, CRN, ComputerWorld and Digital Review.
 
 
 
 
 
 

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